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The New Tools of Monetary Policy (Brookings, 11 min read) Ben Bernanke makes a strong defence for using QE and forward guidance – arguing that it provided the equivalent of 3% in short-term rate cuts. He argues that the Fed could use yield curve control, private asset purchases or even negative rates. But he is against raising the inflation target. He also doesn’t see Fed policy as contributing to financial instability or growing inequality. [Bullish stocks]
Negative Interest Rates Aren’t Such a Departure After All (Bloomberg, 4 min read) Yale professor Paul Schmelzing finds that real rates have declined for the last 600 years, falling about 1% every 60 years to near zero today. Moreover, significant portions of history saw developed economies operating under negative real rates. The only extended period without negative IR is 1983–2008 (“the Great Moderation”). [Bullish rates]